CIA venture arm funds Mass. firm

A Somerville data analysis firm is getting an injection of venture capital from an extraordinary source -- the Central Intelligence Agency.

Spotfire Inc. creates software that transforms vast amounts of complex data into images that reveal the relationships between pieces of information. The company, founded in 1996, has about 700 clients in a variety of information-hungry industries ranging from oil and gas exploration to pharmaceuticals.

Now the CIA plans to tap Spotfire's expertise -- and possibly make a little money in the process. The agency has signed an agreement to work with Spotfire on the development of data-visualization tools specially tailored to the needs of the intelligence community.

''In the intelligence community, most of what they look at is chaff," said Spotfire president Rock Gnatovich. With Spotfire software, the CIA hopes to be able to see at a glance the data that might prevent a future terrorist attack.

But the CIA isn't just shopping for software. It's also taking a small equity stake in the company, through In-Q-Tel, a venture capital company operated by the CIA.

In-Q-Tel was founded in 1999, when agency technologists realized that the most powerful new technologies were being developed not in government laboratories but in the private sector. The CIA tapped Gilman Louie, former chief creative officer for toymaker Hasbro of Pawtucket, R.I., to run In-Q-Tel.

''The question in my mind was: Why would you choose a gamer?" Louie wondered. ''They said, 'We're looking for new blood to come in, and we're looking for someone who can talk to the entrepreneurs, who knows how to build young companies.' "

In-Q-Tel doesn't want to develop rarefied gadgets for use only by spies. It funds no top-secret projects. The In-Q-Tel companies are expected to deliver products that can be sold to the public. This ensures that the research and development costs are shared by the private sector. By contrast, if the CIA obtained the same technology through an exclusive deal with a defense contractor, the taxpayers would have to pick up the entire cost of inventing the product.

''They want us to develop standard commercial product that we can be successful with," said Spotfire chief executive Christopher Ahlberg. ''We're encouraged by this contract . . . to take this technology into the private sector."

Besides, such exclusive contracts take too long. In-Q-Tel tries to ensure that the CIA gets the newest technology while it's still new. Technology, Louie said, ''is like fish in the refrigerator. It's good for a couple of days and then it stinks up the place."

And like any other venture capitalist, the CIA expects its money's worth.

''We're not a charity," said Louie. Of the 40 deals done by In-Q-Tel so far, nearly every company is still in business, and some have delivered a profit.

''You can count our failures on one hand," said Louie.

Louie won't say how much money In-Q-Tel has invested in each company, but on its website the firm says it ''generally invests between $1 million to $3 million" in the companies it backs. Spotfire's Ahlberg said that the CIA will end up owning far less than 5 percent of the company. Spotfire will also collect a significant chunk of revenue from the CIA's purchase of its visualization software.

Spotfire is one of four Massachusetts firms that have attracted venture funding from In-Q-Tel. The other three are in Cambridge, and all of them, like Spotfire, make products to help analyze vast amounts of information.

One of them, MetaCarta, makes geographic analysis software that automatically creates maps of locations mentioned in documents. In-Q-Tel has also invested money in Endeca Technologies Inc., which provides search tools that generate orderly databases from heaps of unstructured data; and in Basis Technologies Inc., which makes software that analyzes documents written in multiple languages.

In-Q-Tel is always on the lookout for more promising tech firms. Louie wants companies that have already found customers in the private sector, which reduces the likelihood that the CIA will be stuck with a product nobody else uses.

''We don't want orphan technologies," said Louie. More important, he said, ''The technology has to solve a problem that we see in the national security apparatus. . . . If I can't put it against a mission need, we're not going to do it."

Hiawatha Bray can be reached at bray@globe.com.